Starting into the new year is the prime time to plan for the future. Basic planning is dependent on three things, cash flow planning, tax planning, and projecting your asset growth based on these two previous categories.
Cash flow planning consists of projecting future revenue streams as well as future expenses. An estimation of your future expenses needs to be as accurate as possible. Things such as capital expenses, buy a new car, or buying a new house needs to be included with the ongoing expenses. It pays to be specific with these items even though you might be off by the year in which they occur.
Tax planning is based on the revenue you project and the deductible expenses that you incur. These items should already be in your cash flow projections and the two projections need to be interactive with each other.
The net worth projection needs to be based on the taxes, cash flow, and pure asset growth. Items such as the net cash flow need to be included in the investment detail of the projection. As well as the purchase of capital assets, the car, the new house, need to be added to the assets already on the books. You may find it advantageous to have the net cash flow to flow in and out of a cash account.
You may seek professional help with this task. A true comprehensive planner is out there you simply need to do your homework. Professionals come in two forms, the fee only planner who charges by the hour and the commission-based planner who collects commissions on the products that he puts in place. Make sure you understand how they are compensated. They should have to disclose this in their presentation. Above all they should be a Certified Financial Planner (CFP)
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